1/01/2017

Headline January 02, 2017/ ''' *THESE-SO-GREAT* : MULTINATIONALS? '''

''' *THESE-SO-GREAT* :

MULTINATIONALS? '''

IN PROUD PAKISTAN -the first conceptual but temporary host of the World Students Society, my every visit to the Standard Chartered Bank is a source of utter delight and ponder:

Every wall hang up and a print has a quotation, rather a commitment, ''We are here to stay*.

THEY SAY THAT IN A CRISIS IT IS easy to tell who your friends are. But Terrorism and this War on Terrorism has just about turned all *planning and visions of development*, upside down.

So rather than leave anything to chance, foreign multinationals in Asia have been busy advertising their loyalty. They have been reminding the region's governments that they ate committed long-term investors.

We do not pull our money out just because things get a little rough, the sales pitch goes, before laying into ''fair-weather friends'' who do. ''You are not to trust them but that is all the more reason to trust us.''

A transparent ploy, but one that just might, might work. That is partly because Asia's government's are desperate for cash, and open to any deal that, that offers to create new jobs or prop up local business.

But rather than rely on desperation alone, the multinationals have also taken great care to alleviate the politicians biggest fear: they will be accused of siding with the enemy.

Hence the effort by the multinational to stress the differences between themselves and other foreign investors.

Since it is hard to uproot a chemical factory, these investments, once made, are far more enduring than the flows of ''hot'' money that whisk in and out of emerging markets.

It is worth recalling that back in the late 1990s, when Asian economies spun into deep troubles, bosses such as Gary Wendt, head of the GE Capital, could talk smugly about 200-year plans, while ridiculing young traders.

Then at a follow up gathering in Singapore, Mr. Wendt told the region's leaders that they needed more investors like him, ''not one that sits at a computer and says sell''.

At the time, 1998 and around, other multinationals, too, have been scoring points for steadfastness. When the Thai baht collapsed for example, Ford continued to plough ahead with a new car plant in Thailand.

Besides opening it, the firm went on and helped to create several new component suppliers, established a dealership, a maintenance firm, and even a new finance company [all this while the government had to close 56 others].

Expectedly, some governments did appear susceptible to the charm at least in areas where they were most desperate such as banking. Thailand and Indonesia went on to allow foreigners to buy control of local banks, although in Indonesia, this liberalisation had yet to be tested in practice.

Half Truth, Yes!

The world understood that the multinationals message of 1997s was only half right. It is true that the multinationals were a stable source of capital and technology.

Asian economies, as well as companies themselves, have much to gain if they are treated better. A good start would be to scrap the rules and practices that have discriminated against foreign companies -notably restrictions on their taking controlling stakes in local companies.

After all, foreign multinationals bring more than cash and technology. Since they are listed on their home-stock exchanges, they are subject to much stricter regulation and more transparent auditing.

And their shareholders, besides being better informed, are often more demanding. So they help to produce a more efficient allocation of capital than.would direct investment in badly run local companies.

Even after a massive drop in asset prices, most multinationals are doing deals only with existing partners -since they already trust both the people and the books

That is one reason why most of the deals are small, and why, in much of depressed Asia, direct investment from abroad has been falling over the last couple of years despite the apparent bargains there.

So if a combination of battered domestic companies and a desire for stable investment encourages governments to offer such investors more, it will be to their own benefit.

There is a danger, however, that many governments will succumb to the other -wrong- half of the multinationals message : that portfolio investment is somehow less worth having. That may encourage them to delay making the reforms needed to attract more of it.

The ease with which this money can cross borders raises obvious problems, for which there are no foolproof solutions. But the benefits it bring are every bit as real as those from foreign direct investment {FDI}. More important, for many kinds of investment, FDI is no substitute.

By bringing more investors into local markets, portfolio flows help to boost liquidity, allowing local investors to get better prices.

Moreover, so called ''hot money'', if allowed to seek out the highest returns, would flow to the many of the small entrepreneurial companies that most need and deserve it, but currently lose out to the bigger boys.

If those smaller firms are to thrive, Asian governments will need to change the rules for listing, issuing and trading shares, improve local accounting standards, foster new securities markets, and make it harder for conglomerates and bureaucrats to push them around.

Such firms are the true friends of of any growing economy. And no matter how governments handle multinationals they will lose them if they do not also try to attract other kinds of money.......however ''hot''. :

With respectful dedication to all the Multinational companies in the world. See Ya all on !WOW! -the World Students Society and Twitter-!E-WOW! -the Ecosystem 2011: